A Mercury Insurance Co. marketing representative waxes enthusiastic about her Honda Civic, which shouldn't come as a great shock because, after all, it is a popular model, but Debbie Perea's car is quite different than most you see on America's roadways. Perea proudly drives a hybrid, a car that uses a combination of gas and electric power.
"I love it," Perea says about her 2003 Honda Civic Hybrid. "It's a great little car, and it definitely saves me money on my daily commute to and from work. I drive 20 miles each way, five days a week, and I spend $20 a week on gas. I drop about $50 every time I fill the tank on my Sequoia (Toyota SUV)."
However, there are tradeoffs with hybrids. Perea says her Hybrid doesn't take off quick, say, when entering freeway traffic. "But it gets up to the speed of freeway traffic pretty quickly. I don't mind giving up a little bit on a car's pep when I'm saving as much as I am at the gas pump. Gas prices have been going up and up, and there's no end in sight. So, I think that I'm coming out ahead by driving a hybrid. I don't see that many hybrids around when I'm driving, but I'm sure there will be a lot more out there on the roadways very soon."
Perea's boss, Bruce Norman, said, "obviously we insure at least a few hybrids, including my secretary's, but so far there are relatively few of her type of car out there on the road today. I know Debbie sure likes her car. The numbers out there could increase in time. We'll know more in a few years in terms of how they gain in popularity and their insurance claims experience, but it's a little early at this point to give any hard and fast underwriting or claims opinions," said Norman, senior vice president of marketing, at Mercury's corporate headquarters in Brea, Calif.
Kim Hazelbaker, senior vice president of the Insurance Institute for Highway Safety, in Arlington, Va., said only the Toyota Prius and Honda Civic hybrids have enough data for IIHS to rank them in terms of losses, and both came out in 2004. "Right now, we would have to say they're a little better than other vehicles of similar size and type. People are willing to pay extra for the hybrid, so they might be a different breed of driver than those who are buying a gas-driven Civic that is less expensive," Hazelbaker said.
"That means that you've got a very select group buying hybrids," added Hazelbaker. "They might be driving differently than the average person and driving them in different settings, at different times and in different areas. These people are into fuel economy and may be more safety conscious than owners of more conventional cars. They're not going to be burning rubber down the streets of their neighborhood and driving aggressively on freeways. Therefore, they would presumably be better insurance risks than those who drive aggressively on America's roadways."
"I definitely believe that high technology vehicles including hybrids will change the landscape of the insurance market," said John Eager, senior director of claims services at the Property Casualty Insurers Association of America, in Des Plaines, Ill. "We're expecting to see a diminished frequency of claims as high technology vehicles including hybrids continues to improve over time."
Eager cited another impact of hybrid vehicles and other technology. "I anticipate an increase in severity of physical damage claims. When a hybrid car gets into an accident or any car with high technology for that matter, you're going to have a greater chance of a total loss. The repair of hybrids is something that our organization and others in the industry are looking at."
A spokeswoman for the Insurance Information Institute offered no bold predictions on auto insurance premiums for hybrid owners. "It is just too early to tell what effect these hybrid vehicles will have on insurance premiums," says Carolyn Gorman. "If in the future, the loss history shows fewer claims, then premiums will be lower for these cars. If the opposite is true, then premiums would be higher."
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